Capitalism Rocks

Yeah, yeah, yeah! especially in poorer countries. Just look what capitalism has done for South Korea and Taiwan and what is happening in China and India. On the flip side are North Korea, Cuba and most of Africa. These economic and human disasters share a common demographic, ie rule by a megalomaniac like Kim Il Sung, Fidel Castro or Robert Mugabe. The lesson is that wherever capitalism is allowed to flourish, it does so and poor people prosper.

That reminds me of the Live8 rock-fest that kicked off last weekend. “Sir” Mark Steyn pinpoints the mortal flaw of the Live8 bonanza. At the first LiveAid bananarama two decades ago, “Sir Bob (Geldof) was at least demanding we give him our own fokkin' money. This time round, he was asking that we join him into bullying the G8 blokes to give their taxpayers' fokkin' money.”

Steyn again: “I love old rockers - not for the songs, which are awful, but for their business affairs, which so totally rock. In 1997, David Bowie became the first pop star to hold a bond offering himself. Once upon a time, rock stars weren't rated by Moody, they were moody. Today these faux revolutionaries are capitalists red in tooth and claw. The system that enriched them could enrich Africa. But capitalism is the one cause the poseurs never speak up for. The rockers demand we give our fokkin' money to African dictators to manage, while they give their fokkin' money to Winthrop Stimson Putnam & Roberts to manage.”

President Bush announced last week that the U.S. would be doubling aid to Africa. He had already agreed to cancel the debts of the world's poorest countries and to give $15B to combat the AIDS epidemic in Africa.

But the socialists at G8 won’t be satisfied since the principle US approach relies far too much on that nasty capitalism.

What they want is protectionist tariffs for agriculture in the Third World that would raise food prices in those countries, penalizing the poorest, and choke off trade with the West, thus reducing economic opportunities for poor producers. The G8 approach is for government controls and against markets -- ignoring the fact that government in poor countries is very often corrupt. It wants more aid instead of more trade -- ignoring the fact that aid goes to governments and strengthens their power, whereas trade benefits the hardworking poor. It wants to stop privatization programs -- ignoring the fact that government monopolies in the Third World are treated as private bank accounts by the government.

Aid should be made conditional on ending corruption in government, as Bush has rightly seen, but also on protecting the property rights of the poor. (John O’Sullivan, Chicago Sun Times.)

The U.S. approach is based on the Millennium Challenge Corporation, described thus by the Economist (7/23 issue):

"Other donors tend to focus on tear-jerking issues such as AIDS, or on boosting the budgets of the better-run poor-country governments so they can provide better public services. The MCC seeks to promote economic growth in those countries--which is more complicated and takes more time."

A new paper from the International Monetary Fund finds that aid does little to promote economic growth. And economic growth is by far the most effective way of alleviating poverty in the developing world. A World Bank study of growth and poverty in 14 developing countries found that poverty dropped in the 11 countries that experienced substantial growth, and rose in the three that saw little or no growth.

It will be interesting to watch the G8 conference this week to see if the other nations are willing to let capitalism work or prefer to impose socialist policies. In spite of all the evidence, I’m not very hopeful.